If you have scrolled through property pages this year, you have seen the claim: “developers in Pakistan are now required to hold buyer funds in escrow.” It is repeated constantly — and for a buyer handing over instalments on Chakri Road or Girja Road, it is dangerously close to false. The federal reform push is real, but most of it is still a proposal. Understanding exactly where the line falls is the difference between assuming you are protected and actually being protected.
What the federal push actually consists of
Two separate things are being conflated in most coverage.
First, a high-level meeting on housing-sector reform chaired by Prime Minister Shehbaz Sharif considered making SECP registration mandatory for every housing society, developer and construction company before launching a project — with documentation, financial audits and compliance checks. The PM directed officials to consult the provinces before finalising anything. That consultation requirement is not a formality: after the 18th Amendment, land, housing and town planning sit with the provinces. Islamabad cannot simply switch on a national regulator over Punjab’s housing schemes.
Second, the SECP has been reviving a dormant escrow framework that already sits inside the Companies Act, 2017 — Section 456. That section says a real estate company must obtain a No-Objection Certificate before announcing or advertising a project or collecting public advances, must sign a written agreement for sale before taking any advance, and must deposit sums received from allottees into a separate escrow account opened in the name of the project, ring-fenced from the company’s other creditors.
Here is the part almost nobody reports correctly: Section 456 has never been notified into force. The entire Companies Act, 2017 commenced immediately except this section, which awaits a federal notification. A 2020 amendment ordinance tried to delete it; Parliament never ratified that, so the text survives in the statute book while remaining inoperative. In October 2025 the SECP began formal consultation with ABAD to frame the implementing regulations. As of now, the escrow machinery is being built — it is not switched on.
The status ledger: enforceable versus proposed
| Measure | Status (July 2026) | What it means for your money |
|---|---|---|
| RDA approval / NOC before advertising, booking or selling | Enforceable now — Punjab law, actively policed | Selling without NOC is illegal; RDA has sealed booking offices and sought FIRs against sponsors |
| Section 75A, Income Tax Ordinance — property above Rs 5 million must be paid by crossed cheque, pay order, banking instrument or digital means | Enforceable now | Cash payment gets your acquisition cost treated as nil at resale, plus penalty exposure — a tax trap, and it destroys your proof of payment |
| Section 236K advance tax at purchase, 236C at sale | Enforceable now | Rates differ for filers and non-filers; budget for it, and get the CPR in your name |
| Written agreement to sell, specific performance, civil and consumer remedies | Enforceable now | Your strongest real protection today is the contract you sign |
| Section 456 escrow + SECP NOC before collecting advances | In the Act, not notified; regulations under consultation | No statutory escrow right yet — you must negotiate escrow contractually |
| Mandatory SECP registration for all developers | Proposal only; provincial consultation directed | Many developers still trade as AOPs or sole proprietors with no SECP footprint |
| National RERA-style authority | Proposal / debated | Provincial regulators (RDA, PHATA, LDA) remain the operative gatekeepers |
So who is holding your instalments right now?
In the overwhelming majority of Rawalpindi launches: the developer is. Your money goes into the company’s ordinary current account, where it is legally fungible with land purchases, marketing budgets, other projects and directors’ drawings. There is no trustee, no milestone release, no statutory bar on diversion. That is precisely the gap Section 456 was drafted to close — and precisely why the gap still exists.
This is not an argument against buying on instalments. It is an argument for treating the payment structure as a negotiable term rather than a fixed form you sign.
The exact payment-protection checklist for Rawalpindi buyers
- Verify the NOC on the RDA’s own record, not the brochure. Match the exact scheme name and the exact phase or extension. Approval of Phase 1 is not approval of Phase 2. Ask for the layout plan approval number and the date.
- Treat “NOC under process” and “file submitted” as an unapproved scheme. The RDA has stated plainly that these phrases carry no legal status. Collecting money against them is unlawful marketing.
- Check the legal entity before the project. Get the seller’s full registered name, CUIN if it is a company, NTN, and the names of directors. If the entity is an AOP or an individual, you have no SECP oversight at all — price that risk in.
- Pay only into the developer’s declared bank account, by crossed banking instrument or digital transfer. Never to a marketing agent’s personal account, never in cash, never to a “society office” cash counter. Get the account title and IBAN written into the agreement.
- Demand a written agreement to sell before the first rupee — not a receipt, not a booking form. It should carry: exact plot number, size, block and phase; total consideration; the full instalment schedule with dates and amounts; the development-charges position (included or extra, and capped or open); the possession date; and the transfer conditions.
- Insist on a milestone or delay clause with teeth. Ask for a defined refund path with a stated interest or compensation rate if possession slips beyond a fixed grace period, and a written cap on how much any surcharge can rise.
- Ask for escrow contractually. Larger and better-capitalised developers can and do agree to route instalments through a designated project account with a bank or a mutually appointed trustee. Even a project-dedicated account named after the project, with a written undertaking that funds are used only for that project, is materially better than nothing. A flat refusal to discuss it is itself information.
- Keep the paper trail complete. Bank instrument copies, stamped receipts matching the agreement schedule, tax challans in your own name, and every allotment or transfer letter. In a dispute, documented payment through banking channels is what wins.
Red flags in an unregistered launch
- Booking opens before any approval document can be produced, with “pre-launch discount” pressure and a 24- or 48-hour deadline.
- Payment demanded to an individual’s account, or in cash to avoid “documentation hassle.”
- Files sold without a plot number — pure paper trading, with allocation promised “later.”
- No written agreement to sell, only a booking form with the terms printed on the reverse in unreadable type.
- Marketing companies making possession and profit promises the developer will not repeat in writing.
- Land ownership and mutation records not shown, or shown for a different khasra than the advertised site.
- Returns pitched as guaranteed percentages — a securities-style promise from an entity with no securities licence.
Frequently Asked Questions
Is escrow legally mandatory for Pakistani developers today?
No. The escrow requirement lives in Section 456 of the Companies Act, 2017, but that section was never notified into force and the SECP is still framing implementing regulations after consultation with industry. Until notification, escrow for a plot purchase is something you negotiate into your contract, not something the law gives you automatically.
If the developer is not SECP-registered, is the purchase illegal?
Not automatically. Registration with the SECP is required for companies, but many developers legitimately operate as associations of persons or sole proprietorships, and no law yet compels every developer to incorporate. What matters more today is the RDA approval status of the scheme itself. Mandatory registration for all developers remains a proposal awaiting provincial consultation.
Can I pay instalments in cash if the amount is small?
Avoid it. Section 75A of the Income Tax Ordinance requires immovable property above Rs 5 million in fair market value to be purchased through crossed banking instruments or digital means, and the cost of a non-compliant purchase can be treated as nil when you sell — turning your whole sale price into taxable gain. Beyond tax, cash leaves you without the evidence you need if the developer disputes what you paid.
What protection do I have if a scheme’s NOC is cancelled after I have paid?
Your remedies are contractual and civil — recovery, specific performance, or a consumer complaint — which is exactly why the agreement’s refund and delay clauses matter so much. Practically, the protection happens before payment: buying into a scheme with a current, verified RDA approval and a track record of delivered phases is worth far more than any clause you litigate afterwards.
The takeaway
The direction of travel is genuinely good for buyers. Escrow, project NOCs and developer registration will almost certainly arrive — but they have not arrived yet, and anyone telling you your instalments are already ring-fenced by law is selling something. Until Section 456 is notified, your protection is the approval status of the scheme, the wording of your agreement, and the banking channel your money travels through.
That is also why approval status is doing so much work at the moment. Among Rawalpindi options, Silver City — an RDA-approved scheme on Girja Road near the Thalian Interchange, close to the M-2 and the Rawalpindi Ring Road corridor — is one worth shortlisting on exactly that basis. Verify its current NOC and phase status on the RDA’s own record, apply the checklist above to the agreement you are offered, and let documentation, not enthusiasm, decide where your instalments go.
